Tag Archives money

Having a baby: financial lessons I’ve learned


Eight weeks ago, I gave birth. As a first-time mum, to say it’s been a steep learning curve would be an understatement. I’ve learned a lot in that short time, from the basics of feeding and settling all the way to what a healthy poo looks like.

I’m also finding out how parenthood impacts one’s finances. While I’m only at the very beginning of my journey, here’s what I’ve found so far.

 

Nappies cost a bomb

In case you didn’t already know, babies wee and poop a lot. Mine is no exception. Sometimes I change upwards of ten nappies a day. With disposable nappies costing around $40 for a box of 108 the costs quickly add up.

Cloth nappies are typically a more affordable alternative in the long run. There is a large initial outlay but after that the only costs are for cleaning products, electricity and water.

Cloth nappies are also generally kinder to the environment. While the water and energy used to clean cloth nappies still take their toll, cloth nappies are thought to be less detrimental than disposables. One disposable nappy takes 200-500 years to disintegrate and the Union of Concerned Scientists has estimated that an alarming 18 billion diapers are thrown into landfills every year*. Cloth nappies, being cloth, are biodegradable.

But as with anything, there are cons as well as pros. The downside to cloth nappies is that they need to be washed. Continually. From a practical point of view, a time-poor new mother may not have time for all the extra washing.

Unfortunately for both my pocket and the environment, I find myself in this camp. It was a decision I grappled with, but the convenience of disposable nappies wins.

You pay taxes, so accept Government assistance

It’s no secret that dealing with Centrelink is a nightmare. Long queues, seemingly endless call times and confusing processes are all part of the experience. But for many new parents a little financial help from the Government will be worth the pain.

Centrelink offers some new parents financial assistance to help with the cost of raising children. Depending on their situation, new parents could be entitled to payments like the Family Tax Benefit, Parental Leave Pay, Newborn Upfront Payment and Child Care Benefit. You will be means tested when you apply, meaning that your household’s income and assets will be taken into account to determine your eligibility for payment.

The ‘Families’ section of the Department of Human Services website houses information on these payments, as well as a payment estimator which will give you a rough estimate of what you may be entitled to. I also found this article on the BabyCentre website to be useful: www.babycenter.com.au/a562850/government-benefits-for-families

Don’t overspend on things you won’t use

The final lesson I’ve learned is not to go overboard buying clothes, toys and gadgets for baby before she arrives. This takes self control – it’s easy to get caught up buying those adorable little outfits. I admit I went crazy. At the time, I didn’t realise I would receive so many lovely gifts from my gorgeous family and friends. The result is a wardrobe bigger than my own. This is a picture of what I bought on just one shopping trip early on in my pregnancy. Naughty!

baby clothes

Unfortunately my little one has already outgrown many of her clothes. Hopefully we can give her a little sister one day so that some of the items get decent wear out of them!

 

 

 

* http://abcnews.go.com/Technology/story?id=789465&page=1

Manage your budget like a boss

A budget can help you get rid of debt, save towards a goal and generally reduce the stress of worrying about whether you have the money you need available to you. Preparing a budgeting takes a little bit of time and organisation; abiding by it will take some discipline.

Obviously, the idea is to try to find ways to cut back but don’t make your budget so tough you can’t stick to it. The key is to understand where your money is going and then take control of it.

Having a goal makes saving money so much easier. You may want to begin by creating a timeline for achieving your goals to help keep you on track, and then follow these tips.

Take stock

Start by choosing a time period to track your ingoings and outgoings. For instance, if you’re paid monthly it’s therefore probably going to be easiest to track your spending over a monthly time frame.

Next, tally up all of your income from different sources for that period. This may include net incomes from salaries, bonuses, dividends, rental property income and Government assistance. Then look at your expenses and when they are due. I break expenses down into fixed costs (those that remain the same from period-to-period) and variable costs (those that change).

Your fixed expenses will include things like loan and credit repayments, rent, insurances and phone plans. I have all of my fixed expenses set up as monthly direct debits so that they come straight out of my savings account, there’s no chance I will forget to pay them and I can track them digitally. Ensure that there is always adequate money in the account so as not to incur any unnecessary dishonour fees.

Variable costs are things you have to pay each month/week, but which may vary in cost each time. They can be broken down into ‘essentials’ – things that cannot be avoided such as electricity bills and transport – and the ‘nice-to-haves’ like entertainment.

Your overall net position will be your total income less your total expenses. Hopefully, this will be in a surplus position but it may not be. And that’s ok, because the point of this exercise is to find ways to improve your financial position.

Identify areas for improvement

Now that everything is down on paper, see if you can find where you are overspending. Ask yourself:

  • Am I paying enough off my debt? Credit cards generally charge a very high rate of interest – can you find a credit card offering a zero interest period and pay it off within that time frame? Can I consolidate my debts and pay them down quicker with a mortgage or a personal loan at a lower rate of interest? Canstar is a fantastic web resource for comparing loans.
  • When was the last time I reviewed my pay TV, internet and phone plans? Is there an opportunity to downgrade my plans to save some money?
  • Have I reviewed my insurance providers lately? comparethemarket.com.au can help to weigh up many different types of insurance.
  • Am I spending more than I need to on transport? Am I driving too much, paying too much in parking, tolls, taxis? Is public transport a better alternative?
  • Am I actually going to use that gym membership? Either start hauling ass to the gym or get rid of it!
  • How much can I save on the things I like, but don’t really need? Do I really need to order takeout twice a week? Must I really have a fortnightly manicure? Try to set yourself a limit on how much to spend on these non-essential items each period. Little things, like just buying one coffee a day, can set you back quite a lot of money.

Start saving

Once you have identified how much surplus income you have, you will need to put it somewhere. There are many different options available such as high interest savings account, term deposits, managed funds and shares. The most suitable option will depend on your goals, your risk tolerance and your investment timeframe.  You should speak to a financial adviser to help you work out what’s best for you.

 

 

Image credit: ©DanilNevksy via Canva.com

 

 

 

 

 

4 ways you’re wasting money

We’ve all been guilty of careless spending from time-to-time, but it really does pay to be more conscious about where you’re dropping your cash. Small savings can add up.

Don’t believe me? Well if you make the following minor adjustments alone, you may save yourself up to $6,403 a year. Put the extra cash in an account, or even a jar, at the end of each week and watch the savings grow.

 

1. Coffee & water

There is no denying that barista-made coffee is superior to the instant Nescafe in your office’s communal kitchen. But when you realise how much your daily fix is costing you over the course of a year, you may reconsider how essential it is.

Assuming you work full-time (based on a working year of 230 days) and you buy one $3.50 coffee a day, that’s $805 you are spending per year. That’s $805 you could spend elsewhere, or indeed save.

The same goes for bottled water, which can cost around the $3 mark for 600ml. If you refill a water bottle with filtered water from the tap instead of buying it, you may save yourself $3 a day – that’s $690 a year.

Total saving = $1,495

 

2. ATM fees

In Australia, many banks charge non-customers fees between $2 and $3 to use their ATMs. They may even charge up to 80c for a balance enquiry.  However, banks normally waive these fees for their own customers.

Though it might take a bit of extra effort to find your own bank’s ATM (like walking an extra block) it pays to do this as these fees can add up to a significant amount. For example, say you withdraw cash from another bank’s ATM three times a week, and assuming you will be charged a $3 transaction fee each time, that’s costing you $468 per year. You may as well be giving money away. In instances where you can’t find your own bank’s ATM, consider withdrawing a larger amount of money to keep you going longer.

Total saving = $468

 

3. Grocery shopping

Planning ahead for your grocery shopping may take time and effort, but it’ll be worth it when you see how much you can save by doing so.

  • Start off by writing a list of the items you need based on a meal plan for the week. If you plan on taking your lunches to work, as we suggest in the following tip, don’t forget to factor in what you will need for those meals too.
  • Once you know your items, shop around for the best prices. Have a snoop around on supermarket websites for the things you know you’ll be buying. Supermarket specials often start on a Wednesday, sometimes on a Saturday. Then do your shopping at the one offering the most specials on the items you’ll purchase.
  • Don’t be afraid to buy no-name. Australia’s supermarket wars mean that the big supermarkets are broadening their range of no-brand products and the stigma of buying ‘no-name’ is disappearing. I am also a fairly recent ALDI convert – I find that their brands are of a comparable quality and a helluva lot cheaper. For instance, you can save around $3 on a jar of organic extra virgin coconut oil at ALDI. I’ve taken to buying all of my pantry staples at ALDI. So far, no one has been able to tell the difference.
  • By the end of the week, typically by Sunday, you may also find that some fresh items like meat are reduced. When I see big reductions, I snap up things like beef mince and chicken thighs. These items often come in bulk; I divide them into meal-sized portions and stick them in the freezer for future meals.

By doing these simple things, I am now saving myself $50 a week. That’s an enormous $2,600 a year.

Total saving = $2,600

 

4. Buying lunch every day

I was terribly guilty of this when I was working. For me, being time poor and a little lazy meant that I would grab lunch at the company café every day, which would set me back a minimum of $8 every day. That was $1,840 I was spending per year on lunches (again assuming a work year of 230 days).

I could have saved myself a fortune had I taken a little extra effort to package up leftovers from the night before or thrown ingredients for a quick salad together.

Total saving = $1,840

 

GRAND TOTAL = $6,403

These are four incredibly easy ways you can save dough. By making these small changes alone you have the potential to save a grand total of $6,403 per year. Just think about where else that money could go!

 

 

Image credit: ©DianaIndiana via Canva.com

Teach your kids the value of money

Bill Murray, the actor, once said “the best way to teach kids about taxes is to eat 30% of their ice cream”. A tad harsh, but he kind of has a point.

All parents want their children’s lives to be as easy as possible, but there’s only so long that most can support the financial needs of their children and the time to cut the purse strings will eventually come. If we haven’t taught our kids by that stage how the real world works then they could be in for a very rude shock.

This is why I believe it is so important to instil financial values in children from an early age until they become adults in their own right. When the time comes for them to stand on their own two feet they will be well equipped to transition into a life of independence.

The best way to teach kids about taxes is to eat 30% of their ice cream.

I happen to be lucky enough to have some very financially savvy friends who are also ace parents, and who were more than happy to share their tips on how they taught their children the value of money. A collection of the best is below. Taxing ice cream wasn’t among them, but there are still plenty of other great ideas in this lot.

Tips for pre-schoolers

The general consensus among the people I spoke to was that it is never too young to start and that this a good age to introduce the concept of money and exchange for goods and services.

  • Start off by playing a game to identify different notes and coins. Recognising each piece of tender is the easy part, understanding what it is worth is more difficult. Australian coins are not like some other countries’, that get bigger the more they are worth. Nope, that would be too easy. In Australia, a two dollar coin is smaller than a twenty cent piece. That must be very confusing for a young mind. This is where playing shop can help.
  • Playing shop keeper will introduce the notion of exchanging money for goods and services, and how different coins and notes will buy you different things. Use the more valuable notes to pretend to purchase bigger items, and the smaller coins for smaller purchases.
  • Another great tip is to give your child the task of handing money to the cashier and accepting the change when you are at the shops. This will not only reinforce the concept of exchange but will also make them feel super important!

Tips for school age

This is a good age to introduce the concepts of earning, saving, spending, philanthropy and opportunity cost.

  • Once your little one gets the idea of money and exchange it could be time to start introducing pocket money. There’s no hard and fast rule when to do this, just make sure they’ve got a grip on the concepts mentioned earlier. First up, how much to give them? This is entirely up to you, but work within your means and your budget. I know one family who gives their nine year old $7 per week (a dollar a day) and another who gives theirs $20. There’s no right or wrong amount. Next, think about whether they will earn this money or it will be given to them. Working for chores can open up debate about the value of different tasks – some families would simply rather avoid any arguments. But if you do decide your kids should earn their pocket money, some good task suggestions are raking up leaves, cleaning the car, keeping their room tidy and helping with the washing up. You could also incentivise with a bonus if your child performs a task really well. Different families do different things … just do whatever works best for yours.
  • Teach your child about making a choice between spending and saving. To save for something they really want, help them set a savings goal. Help them distinguish spontaneous purchases from things they need. This introduces the concept of opportunity cost. Once your child has got the hang of it, think about making the frequency of their pocket money payment fortnightly then monthly to help them learn to budget and make their money last the period.
  • Define what the pocket money should cover. For example, if your child receives pocket money of $10 a week, they might want $5 for spending money, $4 to go automatically into savings and $1 to a charity. This is a great time to introduce philanthropic giving to youngsters, so that they understand they can help people less fortunate than themselves.
  • The appropriateness of school banking programs like Commonwealth Bank’s Dollarmites program is debatable. Underneath it all, these programs are marketing ploys for the banks but they can help with children’s financial literacy. If your school does not participate in a school banking program, take them to the bank and open an account for them.
  • Board games like the Game of Life and Monopoly are awesome for teaching kids about making and losing money. Card games can even show them the consequences of gambling.

Teenagers:

Introduce the more complex concepts of borrowing, lending, taxation and superannuation once your kids enter their teens.

  • If your teen’s money runs out, try not to just give it to them. This is easier said than done, I know, but it is important to stand firm so they don’t look at you as though you are a perpetual money tree. If you can withstand all the whining when their money runs out, they may start thinking about ways to earn it themselves. I know one very enterprising teen who wanted more pocket money than his parents would give him, so he set up a neighbourhood a car washing business. He handed out some flyers in his cul de sac, which led to one client who he charged 5 dollars. He did a great job, and before he knew it through word of mouth,  three other neighbours others wanted the service.
  • And what about starting work? I would say it’s best to do this as early as possible. I’m going from my own personal experience here. My parents actually discouraged me from working as a teen because they felt it would be a distraction from my studies. This meant I was an adult before I had my first job. When I finally entered the workforce years behind my peers I found I had missed out on crucial learnings; I really had no idea how taxes worked or what superannuation was. And this had a real effect on my confidence. I would therefore recommend encouraging your child to find a part-time job whilst studying, whether it be in retail or at a fast food chain, just to get them used to working. The age you can start work depends on which state or territory you’re in. Visit the Fairwork Ombudsman website for more information.
  • Credit cards open up a new world of financial freedom for teens. It’s really important that you help them understand what credit means and how it can help to build a solid financial history, and also why it’s crucial to pay off your purchases. Help them manage their repayments by setting up a budget and a repayment reminder schedule.

When it comes to teaching kids about money there’s a world of ideas out there. Talk to other parents to see what they’re doing and surf the net. You will also find more great information on ASIC’s website www.moneysmart.gov.au

 

 

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